Bundesbank President Jens Weidmann raised the pressure on governments to agree to a Greek bailout without the European Central Bank taking part in easing the country’s debt burden, saying the euro can withstand a default.
Weidmann said the ECB was unwilling to turn its emergency bond-buying program into a “lasting institution” and that Greece’s implementation of austerity measures and asset sales was crucial to securing the handout to prevent a default. He spoke in an interview with German newspaper Welt am Sonntag.
“If the commitments are not met, that cancels the basis for further funds from the aid package,” Weidmann told the newspaper. “This would be Greece’s decision, and the country then would have to bear the surely dramatic economic consequences of a default. I don’t think this would be sensible, and it would surely put partner countries in a difficult situation. But the euro would even in this case remain stable.”
Weidmann’s depiction of a default as a liveable outcome contrasts with warnings from fellow ECB officials Lorenzo Bini Smaghi and Christian Noyer, as well as European Union Economic and Monetary Affairs Commissioner Olli Rehn, who described it as a “Lehman Brothers catastrophe” last week.
European officials are racing to find a plan to stem Greece’s debt crisis by June 24 while sharing the cost of a new rescue with bondholders. German Finance Minister Wolfgang Schaeuble is calling for Greek bondholders to extend the maturities of their debt by seven years, a move ECB officials say is akin to a default.
Bloomberg
